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Saturday, March 9, 2013

Health Care Law (There, I Fixed It)

A while back I described the reasons on why
universal health care is inevitable in a
modern society. The main point therein is that we can not in a modern
society let people die due to sickness simply because they are not
rich enough to afford the appropriate health care. The question then
becomes not whether society should pay in these cases, but how society
can set up these payments to be as efficient as possible while not
burdening any single member of the society overly much.

In this post, I’ll explain a health care system I would like to see in
Germany, and one which I think would work well elsewhere, too.

Goals

The main goals of this health care system are to ensure that no one in
a society suffers unduly, and to achieve this with the least cost for
society as a whole.

To ensure that no one suffers unduly means to ensure that there is a
way for everyone to afford a basic set of health care options. The
extent of that set of options depends on two factors. The first is
scientific, as medicine has to define that set of treatments which
needs to be administered to avoid undue suffering, while the second is
political, where the elected representatives of the people need to
define what is considered undue. For example, replacing some
bad-looking teeth might not be considered worth society’s money, but
relieving strong pain might.

To ensure the least cost for society as a whole again is based on two
factors. First, science needs to calculate to what extent preventive
care which might not exactly cover undue suffering is less costly than
waiting for the worse symptoms to appear. Second, the system needs to
be set up in a way that provides incentive to reduce cost without
reducing health care quality.

Money Source

Health care costs money, and that money needs to come from somewhere.
The idea of national health care systems is that some health care cost
needs to be paid for by all of society, but that no single member
should be burdened beyond their means. This is a basic form of wealth
redistribution. Richer people should pay more, poorer people should
pay less, so that society as a whole can ensure a good health care
system for everyone.

For this reason, my health care system is a simple addition to the
income tax. A percentage, possibly progressive, of the taxable income
is used for the health care system.

This is different from the current system in Germany, where only
employees (and their employers for them) pay a certain amount of money
for the national health care insurance, and this amount is capped at a
specific level. With this new system, every citizen with income pays
some part of it for health care, no matter what they do for a living.

Coverage

This in turn means that every citizen has a right to health care
coverage. Citizens can not opt out of the payment, meaning they pay
the health care money even if they’d prefer not to, so they should at
no point be excluded from the payments.

My system is centered around any number of insurance companies
competing with each other for customers. Citizens can register with
any health insurance company of their own choosing. If the company
fulfills the requirements below, they tell the state that this citizen
registered with them, and the state will send money to the insurance
company. The same amount of money for any citizen, regardless of their
income level or wealth.

The main requirement for the company to receive this money, though, is
that they need to offer a plan that covers the basic set of
interventions to any citizen without exceptions. Regardless of
preexisting conditions or anything. This basic set of interventions is
defined by the government and is the same for all insurance companies.

If the insurance company does not provide a plan that covers this
basic set, or reserves the right to refuse certain citizens based on
preexisting conditions, citizens can still join them, but the
insurance company won’t get any money from the state. The citizen
still pays their health care dues from their income, but the insurance
company does not see that money.

Beyond this main requirement, the government likely needs to define a
few other requirements for insurance companies to avoid mismanagement
and bankruptcy that will just cost society more money. For example,
they could require a minimum reserve to cover insurance costs.

This setup ensures that there can be any number of health insurance
companies competing for the money from the state on a level playing
field where competition is about providing better services for
citizens, more efficient use of money, better support of preventive
care, education on healthier lifestyles, and so on, all without
jeopardizing the basic health care needs.

Those companies can also offer other insurance plans for further
coverage at any extra cost, which is completely irrelevant to the
national health care system.

The main requirement avoids a pitfall the German system fell in a
while back. Some private insurers simply increased the cost of their
plans the more sick you were, which is economically only sensible. But
this meant that healthier people came to them because of the lower
prices for healthy individuals, while people with more illnesses went
to the public insurance companies that were required to take up
citizens, thus driving up the cost for those companies as they did not
have the income from the healthier individuals.

Exceptional Cost Compensation

This system works on the idea that statistically, the equal payments
by the state should average out any extraordinary cost by individuals.
But there can be certain situations where statistical deviation is too
strong. If these prove to be a real problem, they can be tackled by
identifying groups of higher-than-average needs and increasing the
monthly payments for these groups in particular. Long-term or
chronically ill patients, the elderly and the disabled might fall into
such categories.

Likewise, specific rare but high-cost operations could be subsidized
by the state if they prove to be too problematic for the system.

These extra payments can happen completely without adding any
complexity to the normal tax payment system, as they are done between
the state and the insurance companies only.

But in general, the goal should be to keep these exceptions to a
minimum and let competition, precaution on the hands of the insurance
companies, and the rule of large numbers balance things out.

Health Taxes

There are certain activities, such as smoking, alcohol or other drug
abuse, but also high-risk sports, which increase the likelihood of
ones own health care costs to increase significantly beyond the
average.

To reduce the amount of cost this puts on society as a whole, the
state can put a health tax on related products. Thereby, people who
partake in health-damaging activities are given the freedom to do so,
and are not denied the necessary health care for the results, but they
pay an increased share of money to balance out their own lifestyle
choices.

The money earned from these taxes is simply added to the revenue from
the health care income tax.

Conclusion

The proposed health care system redistributes wealth within a country
in a way so that no citizen has to suffer unduly from health-related
issues, while every citizen pays their fair share of the total cost
for this.

The competition between health care companies will encourage them to
invent new ways of cutting cost, while the basic requirements create a
level playing field so that this does not happen on the backs of the
citizens.

Finally, there are well-defined ways for the ruling parties to
influence things according to their political and social beliefs
without changing the basic system. They can define which health care
interventions constitute undue suffering and also add specific health
taxes to offset individual choices from collective payments. The
system also incorporates current research by allowing scientists to
figure out which preventive measures reduce the total cost the most by
avoiding illnesses to develop into undue suffering.

The resulting system is simple, efficient, and ensures a sensible
level of health care for everyone.